President Trump plans to nominate Kevin Warsh, a former Fed governor, as the next chair of the central bank. Warsh advocates for lower interest rates and a smaller balance sheet, with analysts expecting his nomination to be well-received by the markets. Despite a divided Fed, Warsh’s experience and credibility are seen as strengths for the role.

Warsh, a fellow at Stanford University’s Hoover Institution, has shifted to supporting Trump’s views on policy. He has criticized the Fed’s balance sheet and mission creep, aligning with the president’s calls for lower rates. Analysts believe Warsh’s nomination is credible and expect him to be confirmed by the Senate, with potential impacts on rate decisions and policy direction.

Warsh’s stance on interest rates and Fed policy may shift once he assumes the chairmanship. While he may push for lower rates initially, his historical hawkish views and focus on inflation prevention suggest a more balanced approach in the long run. Committee dynamics within the FOMC could also play a role in shaping rate decisions under Warsh’s leadership. President Trump will nominate Kevin Warsh, a former Fed governor, as the next chair of the central bank. Warsh advocates for lower interest rates and a smaller balance sheet at the Fed. Analysts believe markets will see him as a credible choice, with a smooth Senate confirmation expected. However, significant changes to the Fed’s operating framework may be unlikely.

The Fed kept interest rates steady at its January meeting, with Powell stating rates are at a level considered neutral. Markets are estimating a 47% chance of a rate cut in June, a probability that has not changed significantly since Trump’s announcement. Bond futures traders are now pricing in a 48.5% chance of a rate cut in June, according to the CME FedWatch Tool.

Read more at Morningstar.

President Trump plans to nominate Kevin Warsh as the next Federal Reserve chair. Warsh has supported lower interest rates and a smaller balance sheet at the Fed, which analysts believe will be well-received by the markets. His Senate confirmation is not expected to face major obstacles.: What Kevin Warsh as Fed Chair Could Mean for Interest Rates